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IPO fever is back in full force with the public announcement of Twitter's IPO plans to raise up to $1 billion.
Twitter's site was flooded shortly after 5 p.m. Thursday with tweets about the company's IPO filing.
The filing had been expected for some time and provided the first glimpse into the micro-messaging service's highly guarded financials. The numbers are mixed at best and leave savvy investors wondering if Twitter stock is a buy.
The Twitter IPO Details
Indeed one of the most highly anticipated stock market debuts of the year, we still don't know the company's valuation because the number of shares and price range have not yet have been revealed. We will keep you updated on the Twitter IPO price and date when they're released.
What we do know is that in August, Twitter pegged fair value of its common stock at $20.62 a share. And with 620 million shares outstanding, that suggests a valuation of around $12.8 billion.
At $12.8 billion, Twitter valuation would be 28.6 times the last 12 months' revenue. That looks pricy when compared to Facebook stock, which sold shares for roughly 26 times revenue, and LinkedIn (Nasdaq: LNKD), which debuted with a price-to-sales ratio of about 14.5.
But Twitter is at a tipping point where fixed expenses are finally covered by revenue. And prospective users will propel profit margins going forward. Investors in a high price/earnings (P/E) initial public offering find that kind of margin growth reassuring.
"Whether it's worth $12 billion or not is really going to come down to how they can embrace this real-time news and information vision, how they can extend it to other revenue lines and how they can grow around the world," Brian Vlau, a tech analyst at Gartner Inc., told Bloomberg.
And the losses are a non-issue, according to Brian Wieser, an analyst at Pivotal Research Group. He told Reuters, "It would have been a surprise if they had a profit."
Goldman Sachs Groups Inc. (NYSE: GS) grabbed the top underwriting spot, with JPMorgan Chase & Co. (NYSE: JPM), Deutsche Bank AG (NYSE: DB), Bank of America Corp. (NYSE: BAC), Allen & Company LLC, and CODE Advisors assisting.
The $1 billion offering would be the largest for an Internet company since Facebook became a public company in May 2012.
Overshadowed by a number of technical and trading glitches, Facebook's IPO was a flop. Shares fell some 50% in their first three months of trading. Shares have since recouped those losses and surpassed $50 a share for the first time a few weeks ago.
The Twitter stock ticker symbol is TWTR, although it's not known whether the micro-blogging behemoth will list on the New York Stock Exchange or the Nasdaq.
Here's a breakdown of the good and bad numbers we learned from the Twitter IPO details: